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Ghosn Not Gone: Nissan CEO, Renault Boss Survive Spy Scandal, for Now

Nissan and Renault’s chief executive officer and president, Carlos Ghosn, and his Renault right-hand man, Patrick Pelata, have survived the massively embarrassing Renault spy scandal, for now. Ghosn and the Renault board have rejected Pelata’s offer of resignation, and both Ghosn and Pelata, the French automaker’s chief operating officer, as well as other top managers, have returned their 2010 executive bonuses. They will forego bonuses this year.Ghosn also has six closed Nissan factories on his hands in the aftermath of Japan’s earthquake and tsunami.“Ghosn remains head of Renault, Nissan and the Alliance,” a spokeswoman said, via email. While Renault management and its board are anxious to put the case behind them, the French government, which owns 15 percent of Renault, is not. There have been suggestions that the case could jeopardize the Alliance with Nissan.It is “not illegitimate” to consider Ghosn and Pelata’s jobs as being in the balance, French Industry Minister Eric Besson said Wednesday, according to Bloomberg, which quoted an interview on RMC radio. The issue, Besson told RMC, is Ghosn’s earlier statement to France’s TF1 television that there were “certainties” about the case.The Alliance spokeswoman said the board, which includes government, union and industry officials, has “unanimously backed Ghosn’s plan to restore confidence and overhaul the security division.”Here’s what happened. In January, Renault suspended product development chief Michel Balthazard, his subordinate, Bertrand Rochette and Matthieu Tenenbaum, chief of the electric car program, on suspicions of receiving payment from Chinese companies for electric car technology. Renault and Nissan are working on the same electric power chemistry and technology, no doubt sharing resources, though they’re working on different kinds of applications.Renault fired Balthazard and the two others after management received “verbal information” that alleged Chinese payments to them via Swiss and Liechtenstein bank accounts.On March 9, Renault attorney Jean Reinhart said the automaker paid 250,000 euros, or about $347,000, for information about the bank accounts, without knowing who supplied it.On March 11, French police opened a fraud investigation and detained Dominique Gevrey, a former French intelligence agent in Renault’s security department, as he was about to board an airplane for Guinea. France’s RFI radio says on its English language website that Gevrey had claimed to be in contact with the alleged informer, who he refuses to identify.“The attitude he is taking is that of a professional protecting his source. If any such source exists,” said Jean-Claude Marin, Paris’ chief prosecutor, in a March12 press conference.Gevrey was jailed and faces charges of “organized fraud.”“We were able to rule out the claims presented in Renault’s complaint within a very short period,” Marin said. Swiss and Liechtenstein authorities quickly confirmed that bank accounts for the three accused product development managers do not exist, he said.The case against Gevrey is just beginning. While Ghosn and Pelata have survived so far, the case against them could intensify as French authorities learn more about how Renault management bought (literally) the allegations against Balthazard, Rochette and Tenenbaum. As I write this, a planned meeting between Ghosn, Pelata and Balthazard – a vin summit? – is not yet organized.Balthazard, Rochette and Tenenbaum are very legitimately peeved, and mere re-hiring is not going to be enough (perhaps they deserve to receive Ghosn’s and Pelata’s 2010 bonuses?).If the heat doesn’t dissipate on top management, Pelata is the obvious fall guy, though Ghosn could legitimately withdraw from his Renault duties and concentrate on Nissan and the earthquake aftermath in Japan. I don’t know how much time Pelata has remaining on his current Renault contract, but he might have some trouble getting it renewed.After adding the Renault president title to his resume in 2005, Ghosn eased up slightly on the notion of running both companies head-on, and promoted Pelata to the COO position in 2008. Whether Ghosn was hands-on or hands-off the January investigation of the product managers, he’s quickly finding out that running two car companies is even harder than it sounds.The Chinese angle is troubling, too. Why is it easy to make up allegations of Chinese spying on Western automakers? Because the Chinese Domestic Market, the part of the market not related to the joint-venture local manufacturing of foreign models is exemplified by poor-quality cars wearing familiar, Western- or Japanese-cribbed sheetmetal. Results have not matched the level of the CHM’s earnestness. The world’s largest automotive market still can’t produce a homemade design that’s worthy of European or North American competition.

Thanks for a great article Todd - this isn't something that gear heads are going to enjoy, but I think it's important if you are coming from an industry perspective. I'd prefer that spying did not exist and that engineers could be given full reigns on their creative capability, or companies could trust each other with collaborative ventures, but instead money is allocated to chase ghosts. But alas, perhaps it is for the best. Oh and has anyone figured out magnetic drive trains yet? Seems like it could be a pretty great idea.

There's a change, the French accusing another nation of industrial espionage. The pot calling the kettle black? France's spy agency is known for routinely spying on foreign corporations at the behest of French companies. The French spy agency was even caught in the 1990s working with Air France to install microphones in first class seats to snoop on foreign executives. American aerospace companies were warned by the CIA that the French Intelligence Agency was targeting US industrial secrets. It got so bad that the US boycotted the Paris Air Show one year and President Clinton authorized the CIA to spy on the French in return.
The French probably found out that the Chinese were interested in acquiring French secrets while the French were spying on the Chinese, and then Renault started a witch hunt that ended badly for them. Why else would these fired Renault executives have appealed directly to the French President, Sarkozy to turn over all French Government information related to this case?